Financing

Wendy's new CEO hits the ground running

Kirk Tanner announced $100 million worth of investments in breakfast marketing and digital upgrades in a bid to kick-start the fast-food chain’s growth.
Wendy's
Wendy's plans to build more corporate stores to show franchisees it's worth it. | Photo courtesy of Wendy's.

Kirk Tanner is apparently not easing into his new job.

The former PepsiCo executive, who was somewhat surprisingly tapped to become Wendy’s CEO last month, announced $100 million worth of investments in breakfast and digital orders on the company’s fourth-quarter earnings call Thursday.

Those investments include $55 million in marketing over two years to boost its breakfast business, another $15 million to upgrade its mobile app and $30 million in digital menu boards. The company also plans to build more restaurants, a decision designed to “put our money where our mouth is,” as CFO Gunther Plosch said Thursday.

“When I look at Wendy’s, I see the highest quality food in the QSR industry, which has built a very strong foundation of sales and profit, alongside a very healthy balance sheet,” Tanner said. “This foundation will serve as a springboard to drive what matters most, accelerated sales and unit growth, so the brand can reach its full potential.”

The comments came during an earnings call in which Wendy’s said its sales slowed in the fourth quarter, along with per-store profitability. U.S. same-store sales at the Dublin, Ohio-based increased 0.9%, well below the chain’s primary competitors. McDonald’s reported 4.3% same-store sales growth this year and Burger King 6.4%.

It also reported weakening restaurant profitability, at least among corporate locations. Wendy’s company restaurant profit margin declined 160 basis points to 13.5% of revenues in the fourth quarter. That came at the tail end of a year in which those margins had increased by 1 percentage point.

Wendy’s blamed the weakening profits on declining restaurant traffic and higher commodity costs.

Wendy’s stock declined more than 2% in morning trading on Thursday.

This was Tanner’s first earnings as CEO. Typically, chief executives wait at least a quarter to reveal detailed plans but instead Tanner revealed a series of investments and corporate priorities.

Those investments start with breakfast. Wendy’s wants to increase sales in the morning daypart by 50% over the next two years, and believes that a marketing boost, spread over those two years, will help do the trick. That increase would generate more than $150,000 in additional revenue per store over the course of a year.

And that revenue would not likely require additional workers.

“The breakfast daypart is one of the most compelling levers when considering sales growth and margin acceleration opportunities,” Tanner said. “We can grow our breakfast business significantly without adding incremental labor, which drives meaningful improvement in our restaurant model.”

Wendy’s executives believe that value, such as its 2-for-$3 promotion, and new menu news, such as the recent introduction of the Cinnabon Pull-Apart, will continue to drive sales in the morning.

The company is also making a big move into digital menu boards. Tanner said that Wendy’s plans to invest $20 million to roll out digital menu boards to its U.S. company restaurants by the end of 2025. It also plans another $10 million to “support digital menu board enhancements for the global system,” he said.

Digital menu boards are an often-overlooked improvement but can be big for operators who can automatically update the boards. And they can be used to boost sales, too. Wendy’s plans to test improved features in those boards, including dynamic pricings and new offers and AI-enabled menu changes and suggestive selling, Tanner said.

Wendy’s believes its own investments in the technology will spur franchisees to do the same. “As we continue to show the benefit of this technology in our company-operated restaurants, franchisee interest in digital menu boards should increase,” Tanner said.

That’s not the only way the company hopes to use its own investments to spur franchisee interest. Wendy’s also said it plans to build more corporate units, both in the U.K. and in the U.S.

Executives assured that they remain committed to the “asset-light” model but believe the investments will demonstrate the brand’s return-on-investment. “It’s a little bit of leaning in, putting our money where our mouth is,” Plosch said. “We are just demonstrating to franchisees that there’s money to be made.”

Wendy’s also plans to boost digital sales, which totaled $2 billion systemwide last year. The $15 million investment in the app is designed to increase that number.

And company executives acknowledged during the call that traffic was weak among lower-income consumers, which Wendy’s defines as those making $75,000 per year or less. They believe that more value, particularly through its Biggie Bag bundled menu promotions, will drive more value traffic.

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